History Shows It’s Impossible to Put the Inflation Genie Back in the Bottle
The markets basically shrugged off the hotter-than-expected inflation data for January. Most people remain convinced that the Fed can easily get price inflation back to 2% without wrecking the economy. But in his podcast, Peter explains that stuffing that inflation genie back into the bottle is a lot harder than most people seem to think.
Both the CPI and the PPI came in hotter than expected in January.
“In my opinion, it indicated a trough in so-called disinflation,” Peter said.
Jerome Powell hung his hat on declining price inflation numbers. It was the thing he could point to in order to claim he was winning the inflation fight. Even though the CPI was still well above the 2% target, it was coming down. So, it appeared that the Fed strategy was working, and we were well on a path to victory. At that point, the central bank would be free to start lowering interest rates.
Peter was calling this “wishful thinking” all along.
I was pointing out that it was not going to be nearly as easy to get that inflation genie back in the bottle as the markets expected. The CPI and PPI data should have thrown cold water on that narrative.”
But apparently, it didn’t, because the market basically shrugged the hotter-than-expected CPI and PPI data off. In fact, the NASDAQ finished last week with gains. And it is the more speculative, risky stocks that are doing well — not what you would expect if the markets were worried about more Federal Reserve monetary tightening.
The mainstream seems totally oblivious to the extreme difficulty of stuffing that inflation genie back into the bottle and getting back to t
Article from LewRockwell